The 5 R’s of BRRRRRilliant Real Estate Investing
Part 1 of 5
One of the things I love the most about real estate is watching other people succeed! Real estate investing seems to be a mystery for the majority of people, so I’m going to break down exactly how it is that I went from owning zero doors to a significant portfolio in a four-year time period. People want to know how I do what I do and how I got started! So, here it is, my secrets revealed! In my five-part mini-series I will break down the steps of my acquisition analysis in a simplistic way so that you, too can begin to build your real estate portfolio!
I focus my efforts on what is known as the ‘BRRRR’ method of real estate investing. This acronym stands for ‘Buy-Renovate-Rent-Refinance-Repeat’. While this is simply one of many available investment options, this is the one I chose to focus my efforts on. Today’s article is going to focus on the “Buy” phase.
When I am looking to buy a property to suit this model, I am looking for a few key items. I am looking to ensure that a property is being purchased at or below market value in an appreciating market. If you don’t know what an appropriate purchase price is, you can request that your Realtor provide you with comparable sales from the last 90 days.
I look for a property that needs renovation work done, and one that I can add a secondary suite to, like a basement or a coach house.
Once a potential property has been found it’s important to make sure that you do your research. There’s a lot more to assessing the potential than simply finding a property that needs work! You will need to ensure that the property that you are looking at is zoned appropriately and that your local municipality will, in fact, allow a legal secondary suite on the property. You can do this by contacting your municipal planning department.
Once it has been confirmed by your municipality, there are a few other questions that I would consider asking yourself before moving forward with your offer. Some of these questions are:
Are you purchasing a property in an appreciating market? Have housing prices increased significantly over the last few years?
What is the rental market like in your area?
What kind of rents can you achieve?
Is there a shortage of available rental units in your area or a surplus?
Do you have the funds available to create a quality secondary suite?
I would like you to make a note that taking the cheapest route on renovations may not serve you well in the long run. Not only will your appraised value of your secondary suite be lower than you can potentially achieve, you may also set yourself up for a less-than-ideal tenant profile, and who wants that? (we will address this more in the RENT blog coming soon).
What will the appraised value of the property be once you have completed your legal secondary suite and will you be able to obtain a mortgage qualification for this new, higher amount?
Your local Realtor expert should be able to provide you with a conservative estimate as to what you can expect your appraised value to be and your mortgage expert should also be able to provide you with an idea of what you will be able to qualify for in terms of your mortgage qualifications.
Once you have assessed the situation and determined this is the property for you, it’s time to get your Realtor to draft your offer!
***Kelly’s Pro Tips***
I cannot stress enough the necessity of having a Realtor who understands investment real estate if you are new to the world of investing!
Before shopping, I would highly recommend speaking to a Mortgage Specialist who understands real estate investing. Getting pre-approved for an income property will give you a competitive advantage when it comes to writing offers in a competitive market! If one lender says no, go find another one.
Make sure you have your down payment and deposit funds ready to go so that when you find your perfect property you are prepared!
Last but not least…..be patient! These properties are not easy to come by. You need to be persistent and continue looking until you find it!
If you’re looking for a pro team to help you along your journey don’t be afraid to reach out!
Stay tuned for my next mini-series article where I will talk about everyone’s favourite topic… Renovations!
Much love,
KC